Hotels could transform key downtown Seattle corridor

Hotel developers are snapping up parking lots along downtown Seattle’s Stewart Street, hoping to cash in on a fast-growing commercial district nestled between Amazon.com’s growing campus and a possible expansion of the state convention center.

Construction of more than 2,000 hotel rooms, mixed with condominiums or apartments, could transform this way station in Denny Triangle into a base camp for business travelers and another option for tourists.

One hotel-office project has broken ground already, and at least three mixed-use hotel projects — including the largest convention hotel north of San Francisco — are in various stages of incubation.

Developers are responding to surging citywide demand, with downtown Seattle hotels set to meet or beat last year’s record occupancy rates and room prices. There are an estimated 12,000 hotel rooms in and around downtown.

“Hotels are continuing to increase rates strongly and they’re no longer having to catch up from the recession,” said John Gordon, a senior appraiser in Bellevue at real-estate brokerage Kidder Mathews.

This year, for the first time since at least the late 1980s, downtown Seattle hotel occupancy rates are expected to exceed 80 percent, said Chris Kraus, senior vice president at PKF Consulting.

“The city is firing on all cylinders,” Kraus said. “Performance levels are so strong now that new construction is now feasible.”

Helping to juice demand is the expansion of major employers nearby: Amazon.com has 7.9 million square feet of real estate occupied or planned that in total could support more than 40,000 employees, according to the Downtown Seattle Association.

And Seattle Children’s Research Institute, which owns almost two city blocks south of Boren Avenue between Stewart and Virginia streets, says it plans to turn its huge parking lot into research space, up to 1 million square feet, starting sometime in the next five years.

It’s too early to tell how the city’s new $15 minimum wage, which big employers like hotels must pay by 2017 or 2018, will affect hotel developers’ plans. Because wages are the biggest operating cost for hotels, “Certainly there’s going to be some impact, but it’s too soon to fully understand the extent of that,” said Kraus.

Another potential impediment is that hotel guests in the neighborhood won’t be able to catch a ride at the nearby Convention Place transit-tunnel station: Officials expect that bus-only station to close in 2021 when light-rail’s northern extension is scheduled to be fully up and running.

The closest light-rail station is Westlake, where travelers can ride south to Seattle-Tacoma International Airport.

Projects proliferate

• Among the clutch of planned hotels on Stewart, Seattle-based Touchstone Corp. is the first out of the ground: Last summer Touchstone broke ground on Hill7, consisting of a 222-room Hilton Garden Inn, a 300,000-square-foot office building and underground parking garage. The hotel will open by mid-2015.

Stewart Street is already “a gateway street” into downtown Seattle, with major employers and retail located there or nearby, said Douglas Howe, Touchstone’s president. The possibility of an expanded convention center south of Howell Street reinforces the strategy of developing new hotels.

“It’s a logical corridor to infill for the next wave of hotels, office, retail, whatever,” Howe said. “Some hotels like the Westin already are there. It makes perfect sense.”

The Hilton Garden Inn will be an upscale hotel aimed primarily at business travelers who don’t necessarily need a full-service hotel like the Grand Hyatt, Sheraton or Westin.

• Seattle developer R.C. Hedreen Co.’s 1,680-room convention hotel at Ninth Avenue and Stewart Street, on the block that holds the former Greyhound station, is the largest proposed project in the corridor. (It also includes 152 subsidized apartments and is expected to open in 2017.)

The 1,236-room Seattle Sheraton currently offers the most rooms and the largest contiguous meeting space among downtown’s hotels.

The two 35,000-square-foot meeting rooms planned in Hedreen’s 9th & Stewart project are more than twice the size of those at the Sheraton and the Westin.

The city loses out on an estimated $760 million in convention and event business each year because groups can’t get the dates or meeting space they need, according to Visit Seattle, a local nonprofit marketing group funded by the hotel occupancy tax.

For the Hedreen project to work, the city must give up a public alley. The city is doing a study of the project’s environmental impact, and the developer has warned that repeated delays could jeopardize the inclusion of affordable apartments in the project.

• Farther north along Stewart, RBF Property Group has filed plans with the city to build Daola (pronounced “DOW-la”), a 42-story hotel-condo project at 1121 Stewart St. expected to open in 2017. Based in Guangzhou, China, RBF is raising funds primarily through the immigrant investor program known as EB-5 and has hired GIS International Group to develop the project, said GIS Chief Executive Eugene Gershman.

The Daola Tower, which Gershman says means “you have arrived” in Mandarin, would rise 440 feet, according to a preliminary design. The first seven floors would be dedicated to the Daola luxury boutique hotel, with 78 rooms, restaurants and retail. The next 35 floors would be a skinny tower of condominiums, with about three units per floor, each about 1,700 square feet, Gershman said.

The project would be Gershman’s first in Seattle. A native of Moscow, Russia, Gershman said his family’s business has a 40-year history of development in Russia and Hungary.

According to the hotel’s website, a sister hotel planned in China offers thematic designs such as Hello Kitty and Ferrari rooms.

Gershman said work on a similar project started in 2007 but was placed on hold after the financial markets crashed. Now, investors are starting to show interest.

“Everyone wants to know how far away it is from Amazon,” he said.

• The 1200 Stewart, at Denny Way and Stewart Street, may be the most under-the-radar project on the corridor. A group of investors led by Las Vegas-based Midby Cos., which has developed hotels in southern Nevada, is still trying to develop a two-tower condominium complex under a 2012 permit.

Plans envision twin 35-story towers above a five-story podium and include 340 residential units, a 252-room hotel, a fitness center, child-care center and private club, according to city records.

Eric Midby, Midby’s chief operating officer, said the firm was “working with our partners on the site” and had no further comment.

The group’s permit expires in August 2016.

Convention-center role

Developers say they aren’t counting on the convention center’s possible expansion along Olive Way — but if it happens, there’s no doubt it would be a huge boon to their business.

In December, the Washington State Convention Center bought the Honda of Seattle site at Howell Street and Boren Avenue to bank the land for a future expansion. The plans call for opening an annex to the convention center by 2020 that will include 300,000 square feet of exhibit space, 100,000 square feet of meeting space and a 60,000-square-foot ballroom.

Convention Center CEO Jeff Blosser said the linchpin in those expansion plans is negotiating a deal for control of the Convention Place transit-tunnel station. The 2.4-acre site, which King County Metro Transit owns, is now a busy transit hub for commuters catching buses to other hubs across the county.

By 2021, the buses will run only on the street. Light rail doesn’t run through Convention Place Station now, and won’t in the future expansion because of the site’s topography. As part of a deal, the Convention Center and King County Metro could partner to develop atop the transit-tunnel site a mixed-use complex such as a hotel, office or housing, officials said.

For some residents and businesses in the neighborhood, the prospect of a hotel-building boom could mean displacement, but it’s not curtains yet for one of its oldest denizens.

“Everybody who comes in keeps asking,” said Victor Embry, owner of Market House Meats, which has run a wholesale and retail shop at the corner of Howell Street and Minor Avenue since 1948. For St. Patrick’s Day, he said, his wholesale business sells 46,000 pounds of brisket.

Embry said he plans to exercise an option to renew his lease through the end of 2019. His lunchtime deli business, which touts “the best Reuben in Seattle,” has gotten a boost from Amazon.com employees, among others.